DUOL 4Q25 First Take: Another guidance shock, with the real damage in the outlook for 1Q26 and FY26. Both the growth metric of subscription billings and profitability on Adj. EBITDA came in well below the Street.
Some houses had trimmed forecasts in early Feb, for example cutting subscription billings growth to 15% vs. Bloomberg consensus at 20%, and taking down the EBITDA margin. Even so, the actual guidance still missed.
Management has historically guided conservatively. That pattern is well known.
Q4 once again beat across most lines, except MAU, which missed. However, even ignoring consensus, the guidance itself looks soft and growth-light.
(1) Slower growth: 2026 pivots to user expansion over near-term financials, targeting DAU up 20% (slightly above the Street) and mid-term DAU of 100 mn by 2028. Full-year billings growth is guided down to 10–12%.
(2) Higher spend: ongoing investment in AI features, UA, and high-visibility brand marketing. 2026 GPM and Adj. EBITDA margin are guided to decline by 200–300bps and 400–500bps vs. 2025. Headcount expansion drives higher SBC in 1H, lifting dilution to 3–4%, before easing back to 2% in 2H.
Refocusing on user growth is the right LT move, and decisive change is needed now. But investors, with a new CFO yet to build deep trust, dislike near-term earnings pressure and a hazy LT outlook. $Duolingo(DUOL.US)
